Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won't just fall into your lap. Let's figure out what makes a great retirement-oriented stock, then examine whether Disney (NYSE: DIS) has what we're looking for.

The right stocks for retirees
With decades to go before you need to tap your investments, you can take greater risks, weighing the chance of big losses against the potential for mind-blowing returns. But as retirement approaches, you no longer have the luxury of waiting out a downturn.

Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.

When scrutinizing a stock, retirees should look for:

  • Size. Most retirees would rather not take a flyer on unproven businesses. Bigger companies may lack their smaller counterparts' growth potential, but they do offer greater security.
  • Consistency. While many investors look for fast-growing companies, conservative investors want to see steady, consistent gains in revenue, free cash flow, and other key metrics. Slow growth won't make headlines, but it will help prevent the kind of ugly surprises that suddenly torpedo a stock's share price.
  • Stock stability. Conservative retirement investors prefer investments that move less dramatically than typical stocks, and they particularly want to avoid big losses. These investments will give up some gains during bull markets, but they won't fall as far or as fast during bear markets. Beta measures volatility, but we also want a track record of solid performance as well.
  • Valuation. No one can afford to pay too much for a stock, even if its prospects are good. Using normalized earnings multiples helps smooth out one-time effects, giving you a longer-term context.
  • Dividends. Most of all, retirees look for stocks that can provide income through dividends. Retirees want healthy payouts now and consistent dividend growth over time -- as long as it doesn't jeopardize the company's financial health.

With those factors in mind, let's take a closer look at Disney.

Factor

What We Want to See

Actual

Pass or Fail?

Size Market cap > $10 billion $74.4 billion Pass
Consistency Revenue growth > 0% in at least four of five past years 4 years Pass
  Free cash flow growth > 0% in at least four of past five years 3 years Fail
Stock stability Beta < 0.9 1.14 Fail
  Worst loss in past five years no greater than 20% (28.7%) Fail
Valuation Normalized P/E < 18 16.01 Pass
Dividends Current yield > 2% 1% Fail
  5-year dividend growth > 10% 8.2% Fail
  Streak of dividend increases >= 10 years 1 year Fail
  Payout ratio < 75% 17.1% Pass
       
  Total score   4 out of 10

Source: Capital IQ, a division of Standard and Poor's. Total score = number of passes.

With just four points, Disney doesn't deliver everything that conservative investors want from a stock. The House of Mouse has seen some wide swings in recent years, and despite being in the center of a quickly changing industry, the company still has challenges to overcome in the years ahead.

Disney is a huge media empire, with its namesake movie studio and theme parks only representing a small piece of the pie. Disney also owns TV networks ABC and ESPN, as well as a network of radio stations. Moreover, its toy licensing represents a big part of the company's profit-making potential, especially with its acquisitions of Pixar and Marvel in recent years.

Unfortunately, much of Disney's business is prone to huge ups and downs. In its most recent quarterly earnings report, the company announced a rare miss on profits, due to unsuccessful movie releases matching up against better performers in the year-ago quarter. If the NFL's lockout doesn't resolve itself before the season's scheduled start, then ESPN could take a revenue hit in the quarters to come, along with fellow broadcasters CBS (NYSE: CBS) and News Corp.'s (Nasdaq: NWS) Fox.

For every down, though, there's an up. The company's theme parks have been doing well, as growth at smaller theme park operators like Six Flags (NYSE: SIX) and Great Wolf Resorts (Nasdaq: WOLF) has also trickled up to Disneyworld and Disneyland.

Disney doesn't pay as big a dividend as many mega-cap stocks, and with share volatility on the rise, the stock won't necessarily make retirees and conservative investors feel nostalgic about their childhood memories of Mickey Mouse and his friends. Disney may have a place in some retirement portfolios, but only for those willing to keep an eye on changing trends in the media space.

Keep searching
Finding exactly the right stock to retire with is a tough task, but it's not impossible. Searching for the best candidates will help improve your investing skills, and teach you how to separate the right stocks from the risky ones.

Add Disney to My Watchlist , which will aggregate our Foolish analysis on it and all your other stocks.

If you want to retire rich, you need to be confident that you've got the basics of your investment strategy down pat. See if you're on track by following the " 13 Steps to Investing Foolishly ."

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Disney. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.